* CEO had pushed development of Nook e-books and tablets
* Chairman and founder Riggio reviewing strategic plan
* Company reported 34 pct drop in Nook sales in latest qtr
* Shake-up may herald big re-organisation of the company
By Alistair Barr and Dhanya Skariachan
NEW YORK, July 8 Barnes & Noble Inc CEO
William Lynch resigned on Monday, an acknowledgement that its
digital division Nook has failed to compete successfully in the
e-reader and tablet markets and possibly presaging a further
shake-up in the company.
Chairman and founder Leonard Riggio, the largest shareholder
of Barnes & Noble, said the company is reviewing its strategic
plan and announced a series of executive changes.
The new appointments suggest Riggio may be stepping up
efforts to re-organize the company by separating the Nook
business from the chain of hundreds of Barnes & Noble physical
But with Microsoft Corp and Pearson Plc
in the wings as minority stakeholders in Nook, it's not clear
how this will be all be resolved, analysts said.
Signs that Barnes & Noble had come to a turning point with
Nook came in the latest quarter, when it reported dismal
results, led by a 34 percent drop in Nook sales. It also said it
would stop making Nook tablets, marking the end of a costly
attempt to compete with Amazon, Apple and
Google in the tablet wars.
The operator of the largest chain of bookstores in the
United States, has been hit hard by Amazon, which has won market
share by selling physical books more cheaply online. Amazon, the
world's largest Internet retailer, inflicted more damage when
its Kindle e-reader became a hit and e-book sales took off about
five years ago.
Borders, another big bookstore chain, went bust in 2011. But
Barnes & Noble survived to challenge Amazon in the e-book
market. Lynch became CEO about three years ago and led the
development of the Nook e-book store, e-readers and tablets.
"Lynch was highly instrumental in making Nook a centerpiece
in Barnes & Noble's broader operational strategy," Alan Rifkin,
an analyst at Barclays, wrote in a note to investors on Monday.
"With this announcement, Barnes & Noble is, in our view,
signaling that it is attempting to reduce its dependence upon
The company did not name a new CEO but Chief Financial
Officer Michael Huseby was named chief executive of the Nook
Media unit and president of the parent company. Max Roberts, CEO
of the company's education business, will report to Huseby.
Huseby and Mitchell Klipper, CEO of the retail stores, will
report to Riggio.
Shares in the Barnes & Noble fell 2.6 percent to $17.20 in
after-market trading on Monday.
Last year, Microsoft acquired 17 percent of Nook in a deal
that valued the unit at $1.7 billion. In December, British
publisher Pearson bought a 5 percent stake in the business,
valuing it at $1.8 billion.
Barnes & Noble shares surged more than 20 percent in May
after technology website TechCrunch reported that Microsoft was
considering an offer to buy the tablet and e-book parts of the
Nook business. The stock has since given up those gains.
Meanwhile, Riggio said earlier this year that he wanted to
buy Barnes & Noble's chain of nearly 700 namesake bookstores
from the parent company.
"The next step is Chairman Leonard Riggio deciding if he's
going to bid to buy the retail division and from that they'll
then decide what to do with the Nook," Maxim Group analyst John
"Do they close it down? Do they reintegrate it back in the
company? What happens to minority investors, Microsoft and
Pearson? It all can be driven by the Chairman," he added.
Barnes & Noble spokeswoman Mary Ellen Keating declined to
comment on Riggio's plans.
The company is looking for a partner to make Nook color
tablets under a "co-branding" agreement. It will continue to
make black and white Nook e-readers and will still sell the
tablets in its stores, she said.